Sat 2010-09-25 11:02 EDT

Where is the World Economy Headed?

Michael Hudson

...financial maneuvering and debt leverage play the role that military conquest did in times past. Its aim is still to control land, basic infrastructure and the economic surplus -- and also to gain control of national savings, commercial banking and central bank policy...Indebted ``host economies'' are in a similar position to that of defeated countries. Their economic surplus is transferred abroad financially, while locally, debtors lose sovereignty over their own financial, economic and tax policy. Public infrastructure is sold off to foreign buyers, on credit and therefore paying interest and fees that are expensed as tax-deductible and paid to foreigners. The Washington Consensus applauds this pro-rentier policy. Its neoliberal ideology holds that the most efficient path to wealth is to shift economic planning out of the hands of government into those of bankers and money managers in charge of privatizing and financializing the economy. Almost without anyone noticing, this view is replacing the classical law of nations based on the idea of sovereignty over debt and financial policy, tariff and tax policy...Bankers in the North look upon any economic surplus -- real estate rent, corporate cash flow or even the government's taxing power or ability to sell off public enterprises -- as a source of revenue to pay interest on debts...The original liberals -- from Adam Smith and the Physiocrats through John Stuart Mill and even Winston Churchill -- urged that the tax system be based on the economic rent of land so as to keep down the price of housing (and hence labor's cost of living). The Progressive Era followed this principle by aiming to keep natural monopolies such as transportation, communication and even banks (or at least, free credit creation) in the public domain. But the post-1980 world has encouraged private owners to buy them on credit and extract economic rent, thereby shifting the tax burden onto labor, industry and agriculture -- while concentrating wealth, first on credit and then via the enormous recent public bailouts of this failed financial debt pyramiding and deregulation...At issue is the concept of free markets. Are they to be free from monopoly and special privilege, or free for the occupying financial invaders and speculators?...

World Economy Headed.

Mon 2010-09-20 09:49 EDT

Escaping the Sovereign Debt Trap

Ellen Brown

...Debt forces individuals into financial slavery to the banks, and it forces governments to relinquish their sovereignty to their creditors, which in the end are also private banks, the originators of all non-cash money today. In Great Britain, where the Bank of England is owned by the government, 97% of the money supply is issued privately by banks as loans. In the U.S., where the central bank is owned by a private consortium of banks, the percentage is even higher. The Federal Reserve issues Federal Reserve Notes (or dollar bills) and lends them to other banks, which then lend them at interest to individuals, businesses, and local and federal governments...n the past there have been successful models in which the government itself issued the national currency, whether as paper notes or as the credit of the nation. A stellar example of this enlightened approach to money and credit was the Commonwealth Bank of Australia, which operated successfully as a government-owned bank for most of the 20th century. Rather than issuing ``sovereign debt'' -- federal bonds indebting the nation to pay at interest in perpetuity -- the government through the Commonwealth Bank issued ``sovereign credit,'' the credit of the nation advanced to the government and its constituents... The Commonwealth Bank was able to achieve so much with so little because both its first Governor, Denison Miller, and its first and most ardent proponent, King O'Malley, had been bankers themselves and knew the secret of banking: that banks create the ``money'' they lend simply by writing accounting entries into the deposit accounts of borrowers...Today there is renewed interest in reviving a publicly-owned bank in Australia on the Commonwealth Bank model. The United States and other countries would do well to consider this option too.

escape; Sovereign Debt Trap.

Money Game Wed 2010-09-01 10:53 EDT

Why Ben Bernanke's Next Round Of Quantitative Easing Will Be Another Huge Flop

There is perhaps, no greater misunderstanding in the investment world today than the topic of quantitative easing [QE]. After all, it sounds so fancy, strange and complex. But in reality, it is quite a simple operation...The Fed simply electronically swaps an asset with the private sector. In most cases it swaps deposits with an interest bearing asset...The theory behind QE is that the Fed can reduce interest rates via asset purchases (which supposedly creates demand for debt) while also strengthening the bank balance sheet (which entices them to lend). Unfortunately, we've lived thru this scenario before and history shows us that neither is actually true. Banks are never reserve constrained and a private sector that is deeply indebted will not likely be enticed to borrow regardless of the rate of interest...The most glaring example of failed QE is in Japan in 2001. Richard Koo refers to this event as the ``greatest monetary non-event''...Since Ben Bernanke initiated his great monetarist gaffe in 2008 there has been almost no sign of a sustainable private sector recovery. Mr. Bernanke's new form of trickle down economics has surely fixed the banking sector (or at least bought some time), but the recovery ended there. ..The hyperventilating hyperinflationists and those investors calling for inevitable US default are now clinging to this QE story as their inflation or default thesis crumbles before their very eyes...With the government merely swapping assets they are not actually ``printing'' any new money. In fact, the government is now essentially stealing interest bearing assets from the private sector and replacing them with deposits...now that the banks are flush with excess reserves this policy response would in fact be deflationary - not inflationary...

Ben Bernanke's; Huge Flop; Money game; Quantitative Easing.

PRAGMATIC CAPITALISM Thu 2010-08-05 19:52 EDT

REGARDING THOSE ``STRONG'' CORPORATE BALANCE SHEETS

TPC

Brett Arends had an excellent piece on MarketWatch yesterday regarding the true state of US corporations...the total debts of these companies has...skyrocketed...corporations are even worse off today (in terms of debt levels) than they were when the crisis began...It's not just the consumer and banking sectors that remain overly indebted and poorly positioned in the long-run. The period of de-leveraging (balance sheet recession) is likely far from over and the continuation of the private sector weakness likely to continue until the problem of debt is accepted and dealt with...Private sector demand for debt is likely to remain very tepid and this will exacerbate the risk of deflation and economic weakness.

corporate balance sheets; PRAGMATIC CAPITALISM; strong.

Fri 2010-03-12 08:45 EST

AlterNet: The Richest 1% Have Captured America's Wealth -- What's It Going to Take to Get It Back?

David DeGraw, Amped Status

...while US workers are now working more hours and have become dramatically more productive and profitable, our pay is actually declining and all the dramatic increases in wealth are going straight into the pockets of the Economic Elite...the average US citizen is forced to give up approximately 30% of our income in taxes. This tax system is now strategically designed to flow straight into the hands of the Economic Elite. A huge percentage of our tax dollars ultimately end up in their pockets. The past decade proves that -- whether it's the Republicans or the Democrats running the government -- our tax money is not going into our community, it is going into the pockets of the billionaires who have bought off both parties...most every serious economist knows that due to so much theft and debt created in the tax system, the only way to fix things, other than stopping the theft and seizing the trillions that have been stolen, will be for the government to cut important social funding and drastically raise our taxes...Trillions more in our spending on food and fuel has been stolen due to fraudulent stock transactions and overcharging...we have the most expensive health care system in the world and we are forced to pay twice as much as other countries, and the overall care we get in return ranks 37th in the world...The American worker is screwed over every step of the way, and it all starts with the explosion in the cost of a college education. This is one of the Economic Elite's most devastating weapons...The American dream has turned into a nightmare. The economic system is a sophisticated prison cell; the indentured servant is now an indebted wage slave; whips and chains have evolved into debts...

AlterNet; Captured America's Wealth; Go; richest 1; s; take.